Rwanda is among the four Common Market for Eastern and Southern Africa (Comesa) member countries that have adopted the Regional Payment and Settlement System (REPSS).

The system is expected to simplify business transactions and reduce costs.

The estimated transaction cost is five per cent of the trade value on average, with one per cent paid for letters of credit confirmation.

READ: Comesa moves swiftly on cash transfer system

However, with REPSS, confirmation of letters of credit will be free, while every transfer will be charged at 0.25 per cent, making transactions cheaper and faster and safer

“With REPSS, importers and exporters within Comesa will have a faster, safer way to pay each other for goods and services at a much lower cost than the usual correspondent banking system,” said Claver Gatete, Governor of the National Bank of Rwanda.

The other three Comesa countries that have adapted REPSS are Sudan, Swaziland and Mauritius.

The remaining 15 Comesa member countries are expected to follow suit to expedite intra-bloc trade by ensuring a 24-hour regional payment system for importers and exporters.

Through the system, transactions will be channelled from the importer’s commercial bank through his central bank to the exporter’s central bank using the REPSS platform and finally to the exporter’s commercial bank.

Mr Gatete told Rwandans to embrace the new payment and settlement system by taking advantage of the Comesa market with over 400 million people.

“In an effort to encourage Rwanda traders to take advantage, we are giving them a grace period of six months without charging any transactional cost,” added Mr Gatete.

Open to member countries

The executive secretary of the Comesa Clearing House, Dr Kombo Moyana, said the payment system had already been endorsed by all member countries.

“The regional payment system is also open to any other country beyond Comesa for exports and imports through the respective central banks,” said Dr Moyana.

Dr Moyana said the region was phasing out the current system, which involves routing money through banks in the UK, US, China, and takes about five days for a transaction to be concluded.

“We are doing away with sending our money through banks in UK, USA, China, which was taking about five days for a transaction to be concluded which was not favourable for importers and exporters,” said Dr Moyana.

The system did not favour importers and exporters, Dr Moyana added.

According to a 2010 report on Comesa trade, the bloc’s intra-regional trade amounted to $600 million annually through the correspondent banking system.

The regional payment system is also open to any other country beyond Comesa for exports and imports through respective central banks.

Tanzania is also expected to adopt the new system

The traders said that the new system is affordable, with fewer expenses than the current one, where the region has to go through international capitals such as New York, Tokyo, London and Beijing.

“This kind of system is good for traders because it makes payment easy with fewer uncertainties,” said Edwin Sabuhoro, chairman of the tourism chamber at Rwanda Development Board.

Traders would spend between three-five days for a transaction caused by the delay in sending money through banks in UK, USA, China, which was not favourable for importers and exporters.

Mr Sabuhoro said the system is in conformity with the global trend in the international trade to avoid risks involved in carrying hard cash.

“We are following best practices of doing international transactions. There are a lot of risks when using the old system,” said Mr Sabuhoro.

Besides the implementation by individual countries, the official launch is slated for December this year when central bank governors from Comesa region converge in Kigali.